Federal Communications Commission v. National Citizens Committee for Broadcasting – Oral Argument – January 16, 1978

Media for Federal Communications Commission v. National Citizens Committee for Broadcasting

Audio Transcription for Opinion Announcement – June 12, 1978 in Federal Communications Commission v. National Citizens Committee for Broadcasting

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Warren E. Burger:

We will hear arguments next in Federal Communications Commission, 1471 and the related and consolidated cases.

Mr. Griswold, I think you may proceed whenever you are ready.

Erwin N. Griswold:

Mr. Chief Justice and may it please the Court.

These cases are here on petition for certiorari to review a decision of the United States Court of Appeals for the District of Columbia Circuit.

There are many parties and several issues.

All arise out of the ownership of a newspaper and of a broadcast facility, television or radio, in the same community by the same interest.

In the terms of the trade, this is known as cross-ownership.

The issues here result from an order of the Federal Communications Commission made in 1975 after five years of hearings.

This was a rule making proceeding and the result is known as the Commission’s Second Report and Order.

It occupies most of the first volume of the appendix from pages 134 to 338.

The ruling announced by the Commission was that it would not hear after grant a new broadcast license or transfer of license where there was cross-ownership.

This is known as the prospective rule, but the Commission also determined that it would not apply this rule retroactively.

That is, that it would not refuse to renew existing licenses solely on the ground of cross-ownership.

This is known as the grandfather provision of the rule.

There was however an exemption to the grandfather rule.

In sixteen small market situations, where there was no other newspaper and no other comparable broadcast facility, the Commission did apply its new rule to existing licensees.

It said that they must divest either the newspaper or the broadcast facility by 1980.

Numerous appeals were taken to the Court of Appeals for the District Columbia.

The Federal Communications Commission naturally defended its order, but the Department of Justice attacked it, the government speaking with many voices, particularly with respect to the grandfather provision.

The Court of Appeals last March affirmed the prospective order, but it found that the grandfather provision was invalid because it said it was not rational.

It held that because of a compelling presumption and that is the court’s words, in favor of diversity, “Divestiture is required accept in those cases where the evidence clearly demonstrates that cross-ownership is in the public interest.

Under the judgment of the court, those portions of the orders that have retroactive effect and those portions dealing with existing combinations are vacated and the record is remanded to the Commission for adoption rules not in consistent with the opinion of the Court of Appeals.”

In this Court, there are widely divergent interests.

I represent the private parties; newspapers and broadcast stations and the American News Paper Publishers Associations and the National Association of Broadcasters.

Some of my clients are concerned with the perspective rule and others are primarily concerned with the grandfather question.

I am also appearing for the small market situations and also for some newspaper radio combinations which seem to be at some risk of being lost in the shuffle.

I now turn to the validity of the prospective rule.

There is a serious constitutional question here.

The petitioners, newspapers and broadcast stations are subjected to blanket exclusion from Commission licensing merely because they engage in publishing.

The government may not condition the grant of a privilege on the forfeiture of a constitutional right, as in effect this Court held in the Simmons case some ten years ago in a different context.

Warren E. Burger:

Mr. Griswold, suppose a television station had broadcast which were clearly, for the purposes of my question, clearly an after task, the hurdles of the obscenity decisions of this Court, that is we would not sustain a criminal conviction for what they had shown on the television, would that be a ground considered denial renewal of the license of the end of the three year validity?

Erwin N. Griswold:

That would certainly be a ground to be taken into account along with all the other factors in determining whether the license should be renewed.

Warren E. Burger:

Well, how would you square that with the, I am sure you have a distinction between what (Voice Overlap)

Erwin N. Griswold:

Because we are not dealing here with something which says, this is merely a ground to be taken into account with all the other factors.

We are dealing here with a blanket rule which says that if you are in common ownership with a newspaper, you cannot receive a license.

Now, whether you get a renewal or not is the question of the grandfather rule which is the next part of my argument.

Warren E. Burger:

Let me change my hypothetical then the only adverse evidence against the broadcaster is found in the series of broadcast of the kind I included in my original hypothetical question and the Commission said any licensee which resists in that kind of broadcasting will not be renewed.

That is —

Erwin N. Griswold:

Well, that would be precise of this case, that would be announcing a rule that indicates of cross-ownership, there cannot be a renewal and that I suggest is contrary to a constitutional provision.

Potter Stewart:

Say one newspaper in a two-newspaper town was to merge with the other and let us suppose that the existing status that allows that in some circumstances had not been passed, that is does antitrust laws, do they valuably apply?

Erwin N. Griswold:

The antitrust laws is clearly applied to newspapers and to television and then in any event where there is a violation of the antitrust laws as there was in the Lorain Journal case, which came from this Court, the Department of Justice can proceed under the —

Potter Stewart:

Well, one newspaper says along, the only reason I cannot acquire the other newspapers because I am a newspaper, some other company could acquire it?

Erwin N. Griswold:

It would not be as the Lorain Journal Case shows.

It is not just that it is another newspaper.

It is the actual anticompetitive effect —

Potter Stewart:

In the news business?

Erwin N. Griswold:

— in the news business.

In the Lorain Journal Case for example —

Potter Stewart:

And the government is entitled to insist that there be dispersion in the publishing business, is that it?

Erwin N. Griswold:

Mr. Justice, it is a different, it seems to me between the antitrust laws and the influence or weight to be given to anticompetitive effect.

Potter Stewart:

Well I know, but anticompetitive does not conceal the fact that we are talking about competition in the news business?

Erwin N. Griswold:

And I am perfectly willing to concede that the anticompetitive effect can be taken into account along with all other factors in determining whether a license should be granted or should be renewed.

Potter Stewart:

The government under the antitrust laws could validly prevent there being only one paper in the town where there have been two before?

Erwin N. Griswold:

I am not sure of that Mr. Justice.

Potter Stewart:

Well, I suppose that otherwise — based on antitrust considerations, you will conclude that antitrust laws would be violated, if these —

Erwin N. Griswold:

No, I do not Mr. Justice.

There are many cities in this country which have only one newspaper.

Potter Stewart:

I understand.

Erwin N. Griswold:

And I know nothing to indicate that that violates the antitrust law.

Potter Stewart:

I just posed to you though the situation where under ordinary antitrust principles, merger between two papers would violate the antitrust laws and under commonly understood antitrust principles.

Potter Stewart:

You would say that if that were true, you could prevent the merger of the two for papers without violating the First Amendment?

Erwin N. Griswold:

Yes Mr. Justice.

Even though it does violate the anti trust laws and I know of nothing in these cases which indicates that any of these interests has violated the antitrust law.

Potter Stewart:

I know, but then in that case the government is saying there must be two newspaper voices in the city —

Erwin N. Griswold:

And applying the same law to newspapers that applies to every other kind of business in the country whereas this rule applies only to newspapers and applies a rule which is much more stringent.

Potter Stewart:

You would not say then that the antitrust laws could validly prevent all of the press, all of the newspapers and all of the televisions stations in the city merging?

Erwin N. Griswold:

Well, I assume that that would violate antitrust law.

Potter Stewart:

Even though you have televisions stations as well as newspapers?

Erwin N. Griswold:

I thought you said all the newspapers and all the televisions merging.

Potter Stewart:

I did.

Erwin N. Griswold:

Well, that under many circumstances would violate the antitrust laws and I am not contending that newspapers are not subject to the antitrust laws.

I am contending that they cannot validly be made subject to a blanket rule, based simply on the fact that there is cross-ownership.

John Paul Stevens:

Mr. Griswold, let me asked the other side of the same coin.

Do you know how many communities in this country have more than two newspapers?

Erwin N. Griswold:

No, Mr. Justice, I do not, not great many.

John Paul Stevens:

Not a great many and hence we do deal with a product of scarcity, even on the newspapers side?

Erwin N. Griswold:

Even on the newspapers side.

Washington at the moment has two newspapers.

In Buckley against Valeo, this Court said that the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.

This is a sort of Never-Never-Land as Justice Stewart pointed out in the Democratic National Committee case.

Here, the First Amendment designed to protect press freedom is used to restrict the press and this is done to enhance the First Amendment value of diversity on broadcasting.

William H. Rehnquist:

Would you think that Commission saw its source of authority to require diversity in the First Amendment?

Erwin N. Griswold:

I am not sure that the Commission did it only there, the Court of Appeals certainly did. The Court of Appeals said that a presumption was compel in order to carry out First Amendment values.

William H. Rehnquist:

Is that about the same thing in Buckley against Valeo?

Erwin N. Griswold:

Yes.

John Paul Stevens:

Is that not the same thing in Democratic National Committee?

Erwin N. Griswold:

In the Democratic National Committee case.

John Paul Stevens:

Same court?

Erwin N. Griswold:

There is nothing in the amendment about diversity, just freedom and there is a further paradox. The regulations here were intended to affect more than broadcast media and they can have no effect on diversity and broadcasting.

Looking only at broadcasting, there would be no more diversity after these amendments rules are in affect than it was before.

Erwin N. Griswold:

There will be just as many voices.

Warren E. Burger:

Well, has diversity not been a factor in the decisions of the Commission for three years?

Erwin N. Griswold:

Yes Mr. Chief Justice and I am quite clear that diversity can continue to be a factor, but not the controlling factor.

Not the one which makes a controlling presumption in the face of which everything else must view.

The First Amendment —

Warren E. Burger:

When you have a half a dozen considerations, how do you really determine which is the one that both counters back?

Erwin N. Griswold:

Well, Mr. Chief Justice the closest analogy I have been able to think of, I suppose based on my past experience is the problem with the Buckley case.

What do you do when you have more applicants than you can handle.

You take into account a great many factors and you come up with your conclusion and that it seems to me is what is involved here.

Diversity is an appropriate factor, but it is not appropriate to make it the exclusive factor which the Court of appeals did below.

The First Amendment is a shield not a sword to promote diversity, but the Court need not resolve this constitutional question.

Just as in Helvring against Griffiths, it held that in the absence of a clear statement by Congress, it need not decide whether stock dividends are constitutionally subject to income tax and I may add that Congress has never made that decision when constituting stock dividends or not subject to income tax.

By any analysis, the prospective rule is clearly a legislative action which can only be supported by an adequate delegation from Congress.

It is my contention that Congress has never made any such delegation.

In addition to the constitutional though, we have the fact that the ban on cross-ownership is a fundamental exercise of governmental power affecting important aspects of our free society and involving a substantial change in the practice over the past half century.

There is room to argue I think that such a fundamental change, going beyond radio and television, and reaching into the printed press, is one which should be made or authorized by representatives of the people in Congress and that authority to make such a change should not be inferred or surmised.

Now in our briefs, we have discussed the nature of the authorization.

All that has ever been given with the Commission was given to it in 1934 when it was given power over communication by wire or radio, not power over newspapers and it was also given authority to grant licenses if public convenience interest or necessity will be served thereby.

Language obviously taken over from the traditional public utility statute without any thought of newspapers.

Moreover, we have some legislative history which is pretty good, detailed in the newspaper, in particular in 1952, the Senate passed the statute affecting the powers of the Communications Commission.

The House amended that statute with an explicit provision saying you do not have any power over newspapers.

The exact language is quoted in the brief.

It went to conference and the conference took out the house amendment.

But the Conference Committee issued a report in which it stated that this was taken out because it was unnecessary that the Commission did not have any power over newspapers.

William H. Rehnquist:

How much of a weight can we attribute to what the 1952 Congress thought as to what the 1934 Congress amended?

Erwin N. Griswold:

I would suggest Mr. Justice that that is not what we are dealing with here.

We are dealing with what the 1952 Congress did.

The 1952 Congress, many times committee reports have been used to establish the intention or meaning of an Act of Congress and in the hierarchy of committee reports, conference committees are the very highest and here we have a Conference Committee report, clearly dealing with this question after which both houses passed the statute and the President signed it and I would suggest that is I agree, it is not language and the statute, but it is the closest to it that you will ever find and it is not simply a case of subsequent members saying, well, we did mean so and so back there in 1934.

Now, I must turn to the grandfather question.

The action of the Commission making its new rule in applicable to existing licensees except in certain small market situations.

Erwin N. Griswold:

The court below has held that the Commission could not in the court’s words rationally reach the conclusion in favor of grandfathering and it is held, apparently based on First Amendment values that there is a “presumption in favor of divestiture” which must be given “controlling weight.

”So that “divestiture” is required except in those cases where the evidence clearly discloses that cross-ownership is in the public interest and the court expressly recognized that its pronouncement was a “court approved policy” and it remanded the case to the Commission for adoption of a rule not in consistent with its opinion.

In doing this, the court violated proper standards of judicial review because it is not its function to tell the Commission what rule to make.

For example, if the Commission knew that it could not use the grandfathering technique in this area, it might decide that no rule at all is preferable.

That is the matter with the Commission not the court, but the court below has decided that divestiture is required except on an affirmative showing of public interest.

In essence, this is the question which was decided by this Court six years ago in the Democratic National Committee case.

There the court below held that the Commission must make a new rule requiring licensees to accept editorial advertising on the same general ground.

This Court held that there was no such constitutional requirement and that Court should not freeze the Commission’s necessarily dynamic process into a constitutional holding, but this is precisely what the court below has done here.

It has required that a specific rule be adopted because in the Court’s view and words, the First Amendment’s search for truth will be facilitated by governmental policy that facilitates diversity.

There is no basis I think upon which this conclusion can be supported.

I am supported with respect to the grandfather argument by counsel for the Federal Communications Commission and I think that I will leave most of the rest of the argument to Mr. Armstrong, but this Court has held in the Idaho Power Case that the selection of appropriate policies in carrying out statute is an administrative, not a judicial decision and in Board of Trade against the United States, a good many years ago the Court said, we certainly have neither technical competence nor legal authority to pronounce upon the wisdom of the course taken by the Commission.

Now, there are two remaining issues to which I can give on a brief consideration.

In its final order, the Commission listed sixteen situations to which it did not apply the grandfather rule.

These are seven cases where there was co-ownership of the only newspaper and the only television station in the community, even if there were radio stations in the community.

There were also nine situations were there was a single newspaper and a single radio station or a combination of AM/FM radio stations.

These situations have been called egregious cases, but I think that is too pejorative.

They may more accurately be called small market cases.

The Court of Appeals set aside this portion of the Commission’s decision and in this respect the court’s decision should be sustained.

The Court of Appeals was correct in holding that “the record contain no evidence that justified the desperate treatment of the sixteen affected combinations” and the Commission itself said that the rules are not in the least premise on the existence of improprieties in the operation of the media holdings.

William H. Rehnquist:

Counsel, if we are talking about rules, why is there need to be any reference to a record?

The Commission can make a rule without having any record before it, can they not?

Erwin N. Griswold:

That certainly is a nice question.

I would suggest that a rule which is applicable to only sixteen instances out of hundreds is not really a rule, but necessarily involves what amounts to an adjudication with respect to those sixteen instances.

For example, in some of these cases there is a cable television.

In one of the cases, where there is a newspaper and a television station, there are seven radio stations in addition to separately owned in the community and all of those things it seems to me should be taken into account.

This question of the small market cases is dealt with more fully in the red covered brief.

Finally, I would say that this dog has a very small tail.

There are a few situation of cross-ownership of a newspaper and radio station where there are other broadcasters, television or radio in the same community.

These were not covered by the Commission’s order because of the grandfather’s clause.

However, should the Court uphold the Court of Appeals and saying that the grandfather’s clause is invalid then they would be swept in, but the position is made in the blue and the green brief, that radio is different from television, that there should be separate consideration to the question whether the rule should apply to radio, and where there is only a radio or television and there are other voices in the community and my position is that care should be taken to see that these newspaper radio combinations are not just caught up in the draft and carried away.

Erwin N. Griswold:

Our basic contention is that the Commission had no authority to make any rules in this area either for constitutional or statutory reasons, but that if did have that such authority, it did have power to make the grandfather provision.

Warren E. Burger:

Mr. Armstrong.

Daniel M. Armstrong, III:

Mr. Chief Justice and may it please the Court.

The Commission’s fundamental position in these consolidated cases is first, that our prospective rule is a rational exercise of a rule making authority grounded in the public interest standard of the 1934 statute.

Secondly, that our refusal to apply the new policy against additional co-located newspaper broadcast combinations to existing combinations, except in certain of the small market cases is rational and was adequately explained in the Second Report and Order.

On the first contention at the outset, I believe a question came up as the whether the Commission felt that the First Amendment was the source of the prospective rule.

I will concede that I think the court may find some language in the Commission’s Second Report and Order in which the Commission said that what we are doing here is consistent with the objective of the First Amendment to encourage a number of speakers, but I would not stand on the First Amendment constitutionally, compelling the Commission to have adopted the prospective rule.

Instead —

Byron R. White:

How often as it?

Daniel M. Armstrong, III:

Or even –well, I think Mr. Justice White that it is authorized by this Public Interest Standard and the Communications Act.

Byron R. White:

Which is one?

Interstate Commerce?

It is interstate Commerce basis?

Daniel M. Armstrong, III:

It is the standard that among under considerations that the Commission can take into account in allocating spectrum resources is a policy of diversity and that is one component of the public interest.

William H. Rehnquist:

Based on Congress’ authority over interstate commerce?

Daniel M. Armstrong, III:

Yes sir, yes sir.

William H. Rehnquist:

Not the First Amendment?

Daniel M. Armstrong, III:

Yes sir and not the First Amendment, I understand your question.

In applying that diversity component of the public interest standard, the courts, both the Court of Appeals and this Court’s dictum in the 1959 RCA Case have long recognized and being visible conceded this that one of the relevant factors the Commission can take into account in citing how to allocate spectrum resources is whether the applicant before it has ownership interest, not only in other broadcast stations, but also in newspapers.

So, and I believe Mr. Chief Justice that you may have alluded to this, as we view this case, the real question in this case raised by the prospective rule is not a First Amendment question.

It is whether the Commission has rationally in applying the public interest standard of the Act reached the position where it is ready to announce that this one relevant factor is now going to be determined.

I might say it is not determinative in an exceptional case which might warrant a waiver of the rule, but for purposes of argument since that is admittedly an exceptional case we will precede on the assumption that we said it is going to be determined.

And the Commission will respectfully submit that that is not a case of first impression before this Court because prior to the adoption of the multiple ownership rules that was before the Court in the Storer Broadcasting case in 1956, if an applicant owned seven AM radio stations for example and was applying to the Commission for an eighth AM radio station, presumably it would have been recognized that in applying the diversity policy in passing on that application, the Commission could certainly take into account the fact that the applicant already owned seven AM stations.

But the argument prior to this Court’s decision in Storer which the Court of Appeals in the Storer case had accepted was that the Commission could not make that one fact determinative and would instead be able to deny that application only after a full hearing in which the applicant could submit all of the so-called other relevant factors, the applicant wished to consider.

Warren E. Burger:

How much weight could the Commission give if an applicant had only four television stations, but their market area came in to play?

Daniel M. Armstrong, III:

Well, I think, I believe I understand Mr. Chief Justice that your question is suppose the Commission was to change the present rule which says there is a limit of five VHF stations to try to change it to four.

If the Commission were to do that, I think we would argue that —

Warren E. Burger:

What I had in mind was four stations in New York City, Newark, Trenton and Philadelphia or something like that?

Daniel M. Armstrong, III:

I think the closer the location, the easier a job the Commission would have in convincing a court that its public interest judgment was rational.

Yes sir, I would not want to say that we could not argue for a different limit even if they were not close together, but that is clearly relevant and that is my point in this case.

Daniel M. Armstrong, III:

That just as it was a rational public interest judgment in Storer to finally reach a judgment that seven AM stations is subject to a waiver.

And this Court said the Commission once it reached that judgment could announce its judgment in the form of the rule and the Court reversed the Court of Appeals in Storer.

We are saying to you that a point has now come and the Commission has rationally explained why it feels it is now in a position to make the fact that an applicant for a new license or a transfer, fact that that applicant is in newspaper owner, we are now ready in the application of our licensing experience to say that is going to be —

Byron R. White:

The case is not over if we agree with you on that, is it?

Daniel M. Armstrong, III:

No sir, I am saying that we have to still defend our grandfather rule with that.

Byron R. White:

Well no, I mean —

Daniel M. Armstrong, III:

Oh! The statutory authority point?

Byron R. White:

We cannot agree with you, you cannot win this case without our deciding the constitutional issue, can we?

Daniel M. Armstrong, III:

Well, I would say —

Byron R. White:

Your position maybe a very rational application in public interest standard and it is still barred by the First Amendment?

Daniel M. Armstrong, III:

Well, we read Mr. Justice White the NBC case to give us —

Byron R. White:

You are going to argue the constitution as it is?

Daniel M. Armstrong, III:

Yes sir.

Byron R. White:

All right.

Thank you.

Daniel M. Armstrong, III:

But if we are acting within our statutory authority and in a moment, I would like to discuss being visible to reference to the 52 legislation, but if it is within our general rule making authority under the 34 Act and if the public interest judgment is rationally explained and if that leads us to a decision to deny an applicant license, it is our position that that applicant has not had his First Amendment rights violated anymore than the applicant for the eighth AM radio station would not have his constitution rights violated, if in applying that rule that was upheld in Storer we turned his application down.

Now, as to the point of the statutory authority in the reference to the —

Byron R. White:

You mean, we can just cite that case as the authority for the constitutional question presented here?

Daniel M. Armstrong, III:

We read that case as saying that in applying the public interest standard if the Commission rationally concludes that an applicant is not going to receive a license, that the applicant cannot complaint because of the fact that as a result not getting a license his First —

Byron R. White:

So your answer is yes, that is it?

Daniel M. Armstrong, III:

Yes sir, where relying on NBC for that point as dispositive.

On the statutory —

Potter Stewart:

(Voice Overlap)arguments, at least part of it was different and that is that this imposes an administrative inhibition on the newspapers, is it not?

Daniel M. Armstrong, III:

Mr. Justice Stewart we view this —

Potter Stewart:

However which, first of all the Commission does not have statutory jurisdiction and secondly it introduces a new First Amendment argument?

Daniel M. Armstrong, III:

We do not ground this case in any way upon any assertive statutory jurisdiction over newspapers.

Potter Stewart:

But that is an impact of the what the Commission did?

Daniel M. Armstrong, III:

The ultimate bottom line in the case as we see it is whether those spectrum resources have to be given to an applicant and we would say that this Court in the dictum in the 1959 case and the Court of Appeals in the McClatchy and Clarksburg Cases has recognized that a newspaper, the status of an applicant as the owner of the newspaper is relevant for the Commission to consider in deciding whether to give that applicant a broadcast station.

So we do not, as I was trying to say, if we are beginning to think that there is new First Amendment issue because of the newspaper status of the applicant injected into this case, it is really just a question of whether the Commission has now reached the point in the application of its licensing experience.

Well, to put the point differently, suppose the situation had not adopted this rule and we had gone through the formalities of the process that lingers, when it is urged that we should go through, case by case by the next 30 years and it just so happened that when this Court reviewed what had happened after the next 30 years, you would find that in every single case the Commission had said in applying our accumulating insight and experience we reached a judgment that the relevant factor of the applicants newspaper ownership is now going to be determinative.

Daniel M. Armstrong, III:

Application denied, really that that would be no different situation than the situation we have now.

The only difference is the Commission has simply announced that it grants, that its attitude is such that there would be a denial.

Thurgood Marshall:

But you did say a lot of newspapers?

Daniel M. Armstrong, III:

Well, Mr. Justice Marshall.

Thurgood Marshall:

I mean for example, the owner can own General Motors, a line of steamship line, Amtrak, four bars and grills, Chase National Bank, that is okay?

Daniel M. Armstrong, III:

Mr. Justice Marshall.

Thurgood Marshall:

But newspaper, no.

Daniel M. Armstrong, III:

Excuse me sir, you are quite correct in your statement of what happens.

Our answer would be that the Commission is even handedly and rationally applying a relevant public interest policy of diversity and I would have to concede you that by its very nature that is the policy which will have more bite as far as a newspaper or another broadcast station is concerned that it would as far as the owner of Amtrak.

Yes sir, that is right.

Thurgood Marshall:

How long do you on the —

Daniel M. Armstrong, III:

There is no question about that, that by its very nature, the policy is going to hurt a newspaper applicant’s chances more than it will hurt the owner of the Amtrak’s chances if he wants to go a license.

Thurgood Marshall:

But then it is just not neutral at all, but you are not neutral, are you?

Daniel M. Armstrong, III:

I think that the policy of, if it could be characterized is that, it nevertheless is not a ground for striking down what we done because the diversity policy would seem to me by the intend of your question would fall and that has been recognized.

Thurgood Marshall:

I still do not see where you get the jurisdiction over the newspaper owner?

Daniel M. Armstrong, III:

We do not have jurisdiction of the newspaper at all.

We have jurisdiction over the newspaper owner, only when the newspaper owner comes to the Commission and asks for a licensed which is what we do have jurisdiction over, the allocation of a radio license.

Thurgood Marshall:

But I mean, do they do have to set out all these other things?

Daniel M. Armstrong, III:

Excuse me sir?

Thurgood Marshall:

The proposed owner, does he have to set out everything else he owns?

Daniel M. Armstrong, III:

I do not want to get drawn into a detailed discussion of the Commission’s ownership purporting requirements, but I think we do require -.

Moving increasingly to acquire increasing annual reports about other ownership interest they may have and certainly we could tell from an applicant being before us I think whether or not the applicant was a newspaper owner or the owner of Amtrak.

Thurgood Marshall:

Well, this is aimed at newspaper?

Daniel M. Armstrong, III:

No sir, it is.

Thurgood Marshall:

I do not care, you get the right one.

Daniel M. Armstrong, III:

Well, the actual wording of this regulation, yes sir, it is, on its face it is.

Thurgood Marshall:

And does that not violate the specific provision of that Committee report?

Daniel M. Armstrong, III:

That was the point I was coming to.

Thurgood Marshall:

Oh! Good.

Warren E. Burger:

Now, before you get to that, we have said, I think on the number of occasions here and other courts have said it that the First Amendment does not confine to newspapers or publishers, it belongs to everyone.

Warren E. Burger:

But suppose you had a broadcast license available and the one of the bidders was Amtrak and the other one was responsible, reputable newspaper.

Would not the inquiry give great weight to the newspaper’s experience in journalism as distinguished from Amtrak’s lack of joint experience in that field?

Daniel M. Armstrong, III:

As I understand it, you are saying that would, in that case does newspaper ownership would actually work in his favor?

Warren E. Burger:

Because it shows their experience?

Daniel M. Armstrong, III:

Yes sir.

On the other hand I would have to concede that consistent with the longstanding Commission policy as reflected for example in McClatchy under the diversity policy, it would cut the other way and how the mix would come out on an the individual case.

Warren E. Burger:

There is only one newspaper, the newspaper that had no others stations and no other –?

Daniel M. Armstrong, III:

Under those circumstances it is quite conceivable that the weight in favor of the experience factor that you mentioned would outweigh whatever the merit the applicant would suffer under the diversity criteria.

On the statutory authority point we have two arguments.

The first one was suggested by Mr. Justice Rehnquist and that is we think for the reasons that I have gone through that the 34 statute, the public interest rule making standard authority given to the Commission in Section 303 as interpreted by this Court in Storer is sufficient to answer the case and that the Court should not give much if any weight to subsequent legislative history that was relied on by the Mr. Griswold, but if the Court is disposed to take into account subsequent legislative history, we call the Court’s attention to the 74 statute.

In 1952 as it was recognized in the argument, neither the House, actually well the House of Representative had, but in the final analysis it was just a conference committee report and there was no legislation on that.

But in 1974, the Congress was fully aware of the Commission’s outstanding rule-making proceeding which is now before this Court.

They followed it closely and there was interchange between the Commission and the Congress concerning the evolution of that percept and each House went on record with a legislative bill in 1974 which we would respectfully submit, simply is inconsistent with the notion that Congress in 1952 had denied our authority in this area.

The House of Representatives said whatever it is you are going to do in your outstanding proceeding on the basis of newspaper broadcast cross ownership, do it in a rule making percept and also finish that rule making proceeding by a date certain.

The Senate took out the first provision, but also passed a provision saying in this outstanding proceeding you have got proposing a rule to ban future newspaper broadcast cross ownership, finish it by a certain date and although the two houses, the different versions were not reconciled and no legislation ever emerged, we do think that the 1974 history would remove any possible conclusion that in 1952 our general rule making authority had been cut down.

To turn to our case before this Court as a petitioner, it is our argument that the distinction between the prospective and retroactive rules is rational one and was adequately explained in our opinion.

In the case of the prospective rule, the Commission admittedly operating on the presumption that it was more realistic to expect true diversity if you did not have common ownership decided to give that consideration determinative weight, even though we recognized and the court below recognized this, that there was no guarantee that the more diverse new points would result if we did have separate ownership.

But the Commission said under these circumstances, a prospective rule where you are not talking about other countervailing considerations, we think the one reason that we had once had for allowing that is no longer determinative.

In other words, we can have a pool of other people coming forward.

We no longer have to rely upon a newspaper owner to get service started and so under those circumstances, even though the gain in diversity may be slight, it may be only hoped for in great many cases, nevertheless where there is no real cost on the other side of the balance wheel, we are going to get it determinative weight.

Thurgood Marshall:

Well, what happens if a newspaper in Baltimore wants to buy a radio, television stations in Washington?

Daniel M. Armstrong, III:

It would depend on the contour of the radio station in Washington whether or not it would place a certain contour over the city of Baltimore.

I do not think it is by any means compelled from this rule that it could not be done.

In fact, as to make this one very clear, this is not a total ban against new newspaper owners coming into broadcasting.

Just to take an easier case if it i.c. Richmond, Virginia then for sure the Baltimore newspaper would be able to be eligible to apply for a radio station in Richmond.

Potter Stewart:

Involves a —

Thurgood Marshall:

That is why I did not pick Richmond.[Laughter]

Daniel M. Armstrong, III:

You picked the case that would require some detailed application of the standards of the rule and I would not know right off hand how it might come out.

Potter Stewart:

It has to do with the City Signal or something?

Daniel M. Armstrong, III:

Yes sir, yes sir.

Daniel M. Armstrong, III:

A specified signal over the community of Baltimore.

Yes sir.

The other considerations that were present in the case of a retroactive rule which did not in our judgment outweigh the presumed gain and diversity that would have resulted from applying the rule across the board were first, a broader divestiture rule of the sort that was advocated by the respondents, National Citizens Committee for Broadcasting would have swept out proven licensees with long records of meritorious service.

The Commission pointed out and I think it was paragraph 109 of the Second Report and Order that these licensees, many of them had been there from the time the station was first established and there was a study in the record that it has not been disputed by Mr. Robins saying that the particular newspaper licensees had shown by their action a much greater long-term commitment to broadcasting than had been true with others.

So, the Commission was confronted with the fact that it was going to have to get rid of a class of licensees who included licensees with outstanding record.

John Paul Stevens:

Mr. Armstrong, how many of the members of the class that are preserved by the grandfather clause with that definition?

Daniel M. Armstrong, III:

Well, Mr. Justice Stevens, every member of that class, it can be said of that member that its record has been before the Commission at every three years at renewal time has been passed upon by the Commission and has been found to be in the public interest and the Commission characterized, generally speaking, the record of the class as a group as meritorious and —

John Paul Stevens:

And your argument is not that it includes some specially well qualified stations, but then everyone in the class has proven his entitlement to a continued license.

Daniel M. Armstrong, III:

Well, it is true.

Potter Stewart:

That is true about every licensee in this country, is it not?

Daniel M. Armstrong, III:

Yes, sir.

Potter Stewart:

With one or two exceptions, every licensee has had his license three years or more.

Daniel M. Armstrong, III:

Yes, sir and in the case of these, though it has been passed upon by the Commission at three year intervals and it is found they had been serving public interest —

Potter Stewart:

And it is true about every licensee in the country with one or two notable exceptions?

Daniel M. Armstrong, III:

Well, I think in the case of these licensees, generally speaking Mr. Justice Stewart, they have been in there longer.

As I said earlier a lot of them have been in there since the beginning so there has been much longer continuity of service in their case than as the case with a lot of other licensees.

Although it is true that the great value which the Commission places on continuity of service has clearly been evidenced by the manner in which the Commission has disposed the renewal applications.

And nothing I might say in our effort to preserve our grandfather rule in this case is intended to immunize any licensee from continuing to have to pass the Commission’s scrutiny every three years and to be judge on their performance.

Thurgood Marshall:

Was diversity involved in each one of these renewals?

Daniel M. Armstrong, III:

I am not sure.

Thurgood Marshall:

I think we have, most of us have familiarity with renewals and applications and sometimes you know renewals are almost perfunctory?

Daniel M. Armstrong, III:

I am not sure.

Thurgood Marshall:

Are they not?

Daniel M. Armstrong, III:

Well, Mr. Marshall —

Thurgood Marshall:

I am not speaking about FCC but in others did it not —

Daniel M. Armstrong, III:

That may be true in other agencies.

Thurgood Marshall:

But it could not be in the —

Daniel M. Armstrong, III:

The Commission is obligated by [Laughter].

Thurgood Marshall:

And include the diversities?

Daniel M. Armstrong, III:

Well, I would not want to concede that we have not followed their statutory mandate to make a public interest finding.

Thurgood Marshall:

I mean, I have difficulty with — suppose it happens that in this town there is one radio station, one television station, and one newspaper and the town decides why should it not and this has been renewed for the last ten times.

It ought to — there is a grandfather clause?

Daniel M. Armstrong, III:

It means that if will not — well, there are certain small market cases which Washington would not include.

So, if it is a larger market, it means that that applicant will not be required to divest because of the cross-ownership factor. It does not mean that applicant three years from now will get a renewal.

That applicant will get a renewal only if the Commission upon judging the applicant’s record of performance —

Thurgood Marshall:

That is with or without this rule?

Daniel M. Armstrong, III:

Yes, sir.

All that these rule does —

Thurgood Marshall:

The rule does tend to later though, does it not?

Daniel M. Armstrong, III:

All that this rule does is tend to give the applicant a chance to have his future fate as a broadcaster if he wants to continue, determined on the basis of his record of performance and not on the basis of the fact that he is a cross-owner, that is all it does.

And in addition to our justification which we think was rationally explained and our right to say that continuity outweighs the presumed gain and diversity, we also relay on the doctrine that this result of grandfather is so clearly rational in terms of our legal system’s bias against retroactive applications and new policies that it really did not require a great deal of explanation.

It is consistent with what the Commission’s licensing policy has been over the years.

It is consistent with what we have done in past instances when we have adapted rules that are designed to further diversity by limiting multiple ownership with almost without exception.

Warren E. Burger:

Is it inconceivable that after five years experience or any number of years you want to pick, the Commission might come to substantially the same conclusion that the Court of Appeals came to now in a rule making proceeding?

Daniel M. Armstrong, III:

It is conceivable Mr. Chief Justice.

Warren E. Burger:

On basis of experience?

Daniel M. Armstrong, III:

The Commission on the basis of experience, five years from now might reach a judgment that it should order more extensive divestiture and give more weight to diversity than it felt it was able to do on the basis of the record in this proceeding because this record did not establish a strong showing and Commission relied on that heavily and clearly intervening experience might change the nature of the record.

That was a very important part of the Commission’s balancing process.

Byron R. White:

Mr. Armstrong, could I ask you what is your view of the relative position, of the relative function of the Department of Justice and the bureaucracies in this case that you think your relative position is governed by Section 2348 of the Title XXVIII?

Daniel M. Armstrong, III:

Yes Sir, I believe that is the position we are relying upon in order for our authority to file —

Byron R. White:

I know, I am sure that it looks like you certainly have the authority, what about the Department of Justice?

Daniel M. Armstrong, III:

Well, it is our view that like the National Citizens Community for Broadcasting, they were a party with a very strong policy preference as to how the Commission should have weighed the competing considerations which were before in the case —

Byron R. White:

So you would say that under 2348, the Attorney General for example, could have instituted the entire review proceeding before the Court of Appeals just disagreeing with it?

Daniel M. Armstrong, III:

Initially, I might say in this case that the Department of Justice did file United States versus FCC, they later withdrew it.

I believe the Court of Appeals denied a motion by the National Association of Broadcasters to strike them as the petitioner.

On that basis —

Byron R. White:

So, they do not question at all of the authority of the — I am sure you disagree with them on the result, but you do not question at all their authority to take the position contrary with respect to divestiture?

Daniel M. Armstrong, III:

We do not question their authority to tell us that they wish to be given more weight to the given presumed gained (Voice Overlap)

Byron R. White:

Or to appear in this Court —

Daniel M. Armstrong, III:

Or to appear in this Court.

William H. Rehnquist:

What if the Federal Communications Commission had turned down the United States’ motion to intervene, do you think they would still have any standing to challenge anything in the Court of Appeals other than the Commission’s denial of motion to intervene?

Daniel M. Armstrong, III:

Your Honor’s question is a good question and I must say that have not focus on that question.

From my point of view from time to time I have considered whether it was appropriate for them to be opposing the Commission on a broad scale in the Courts and I would like to reserve my opportunity of some future occasion to make that argument, but I must say that I cannot be very enlightening to Your Honor on that point.

William H. Rehnquist:

In your position I take in response to Mr. Justice White is that, since the Commission allowed them to intervene just like they allowed a number of private groups to intervene, they have at least the standing —

Daniel M. Armstrong, III:

Yes sir, at least we will go for as far to say under the circumstances where they were a party with the strong policy pitch before the Commission, either a statutory respondent or as a petitioner, they probably should be allowed to make that argument.

Thurgood Marshall:

Mr. Armstrong, but regardless of all that we recognize their right to intervene in this Court at anytime, do you not?

Daniel M. Armstrong, III:

I would guess sir, yes sir.

Warren E. Burger:

You do more than recognize that you insist on it do you not, Mr. Armstrong, you would assert it affirmatively?

Daniel M. Armstrong, III:

Certainly and many instances we would have to rely upon —

Why, why, why, would the Department of Justice have the right to intervene between two private parties?(Voice Overlap)

Why do you not concede that, since this is between two private parties, why is there a right on the part of the Department of Justice to intervene?

Daniel M. Armstrong, III:

Well, I did not understand.

I misunderstood Mr. Justice Marshall’s question to be in that context.

I was thinking about it more in terms of a case where a Governmental Agency was involved and there is some authority, it might not be correct, but we have been led to believe that in some of our cases, for example, Section 402 (b) of our Act as opposed to section 402 (a) which is governed by the Judicial Review Act and that is the case we here now, but if it is a licensing case, we have been led to believe.

That if we do not get proper treatment in our view from the Court of Appeals, we have to have a Solicitor General signing our petition to cert.(Voice overlap)

That is what I have in mind.

Thurgood Marshall:

That was what I meant.

Daniel M. Armstrong, III:

Yes Sir.

Byron R. White:

Where do you find that?

It is not say the Attorney General is responsible for it and has controlling interest of the government in all court proceedings in this chapter then it goes on to say the agency has the right to represented by –?

Daniel M. Armstrong, III:

Well, Mr. Justice White, as I understand it that is —

Byron R. White:

Do you think that includes the power to make the decision(Inaudible)?

Daniel M. Armstrong, III:

Well, in 402 (a) case under our statute, that is specifically governed by Title XXVIII and the Section you have read, clearly gives us the right come here as we done in this case without the department.

We have another statute —

Byron R. White:

Even to bring the petition of cert?

Daniel M. Armstrong, III:

Yes sir.

Byron R. White:

Which you did, you filed it?

Daniel M. Armstrong, III:

Yes Sir, but there is another case in our statute 47 U. S. C. Section 402 (b) which does not appear to be governed by Title XXVIII in just a classic licensing case as opposed to rule making and there we have been given an opinion by the department that they must file.

William H. Rehnquist:

Well, just a minute counsel.

It is one thing, is it not, to say that you may come here only with permission of the Solicitor General and it is quite another thing to say that the Solicitor General may come here regardless of any statutory of authorization just because he feels like coming?

Daniel M. Armstrong, III:

Well, I would qualify the answer that I gave to Mr. Justice Marshall to say that we are thinking of the case that I just described to you where they would be coming here advocating the position that we had advocated in the Court of Appeals.

Thurgood Marshall:

And could come as Amicus Curie without the consent of anybody?

Daniel M. Armstrong, III:

I believe that the federal rules do make allowance for that, yes sir.

Warren E. Burger:

Wallace.

Lawrence G. Wallace:

Mr. Chief Justice and may it please the Court.

I am here representing the United States which is the statutory party in these proceedings [Laughter] and probably would have the right to intervene because of the Constitutionality of an Act of Congress as applied has been challenged.

However, there is no need to exercise such a right in this case.

Under Section —

William H. Rehnquist:

Well, Mr. Wallace, are you not ordinarily expected to uphold the Act of Congress that is challenged under that Section?

Lawrence G. Wallace:

We are not attacking the Constitutionality of any Act of Congress in our submission to this Court.

William H. Rehnquist:

But I thought you said that that is one of the authorities by which you were here?

Lawrence G. Wallace:

We could.

Well we did not have to seek to intervene for that purpose.

Potter Stewart:

And therefore we do not (Voice Overlap)

Lawrence G. Wallace:

That is correct.

Under Section 307 of the Communications Act, the Federal Communications Commission is to grant applications for broadcast licenses if the public convenience interest or necessity will be served thereby, and for more than 30 years, in both rule making and licensing proceedings, the Commission has recognized that this standard requires it to take into account in issuing licenses, the interest of the public in diversity of ownership of the media of communications and among the factors that is historically considered for this purpose in comparative proceedings over the years has been an applicant’s ownership of the daily newspaper in the locality to be served by the broadcasting license.

In this respect, the Commission is charged not to be neutral, but to make an inquiry as to what will serve the public interest under the Statutory Standard, and one of the components of the public interest is diversity of ownership of the media of communications and divergent voices to be heard.

The present rule, before this Court, is an effort to deal with newspaper broadcast co-ownership question in a more systematic way.

It is not a rule that disqualifies newspaper owners from being licensees of broadcast stations.

The rule applies only to co-ownership of a newspaper and a broadcast facility in the same community.

Newspaper owners are not disqualified under this rule from ownership of broadcast stations from licensing broadcast stations, no one owns the particular airways, but from being licensees of broadcast stations in other communities and that is an important distinction to keep in mind here.

It is illustrated very well by the recent exchange between the Detroit News and the Washington Post of television stations in those two cities, which will result in dissolution of two of the two co-ownership situations that were before the Commission when it was considering this rule, by means of the swapping that the Commission anticipated could occur without in any way making newspaper owners as such ineligible to be licensees of broadcasting stations.

But, by applying the public interest standard in a licensing of broadcasting stations, so as to increase or at least to protect against diminishing, the diversity of voices to be heard in that community based on a finding of the Commission or based on its experience and much evidence was before it, that the public looks primarily to these two sources, to its daily newspapers and its local broadcasting stations and particularly its local television stations for its news and for its information on public affairs.

And this is accentuated with respect to local news affairs of the handling of this matter by the adoption of a rule rather than case by case as it has been handled over the years, is entirely appropriate to facilitate business planning and to enable the Commission to bring about required changes as a result of reconsiderations of its earlier policies in which it has granted some so-ownerships of co-located stations, cross-ownerships by means of what has been referred to in these proceedings as divestiture rather than what is being referred to as forfeiture of licenses.

And it is important that any retrospective application that the Commission was considering here was not to being achieved by means of simply forfeiting the value of the license and the goodwill at the time a renewal would come up two or three years hence, by holding a comparative proceeding and simply awarding the license to other applicants, so that the licensee would be able to realize only the physical value of its assets as a result.

The Commission was concerned with protecting licensees against this result by providing a means whereby they would have a reasonable period to swap stations or otherwise to realize the market value of their licenses all with the view toward what the Commission has over the years, we think legitimately recognized to be a component of the public interest standard that it should provide incentives for superior public service, incentives to get people to devote their financial resources and their professional endeavors to providing a superior service without the risk of having to start from scratch when they have provided such as service every three years, in a comparative proceedings against others.

If the public is to be well served in this interest, the Commission undertook to protect this interest by proceeding in a rule.

Making proceeding rather than merely applying from case to case, the new insights and the further insights that is developed into the problem of concentration of ownership of the media and the problems that it has presented that have come to its attention over the years.

It further sought to protect these interests by specifying that it would certify transfers that resulted from the divestiture provisions that it would adopt, and it did adopt some as the Court has been informed for favorable tax treatment under Section 1071 of the Internal Revenue Code, in order to further protect those interests because the transfers were being ordered in the public interest and a waiver provision was also adopted under which claims of particular hardship could be heard with a view toward possibly extending the time in individual cases and the like.

So the rule that has been adopted in so far as it applies prospectively, it seems to us to be valid and reasonable way to apply the public interest standard that the Commission long has been applying under the Act based on the commerce power of Congress and the divestitures that were ordered under that rule we also think were valid regardless of how one views the refusal to order the further divestitures.

Lawrence G. Wallace:

In that respect, we disagree with the Court of Appeals.

We think that Commission did have authority based on the considerations that were before it to recognize that especially severe problems existed in communities in which there were for example only one daily newspaper and one television station where there would be a mutual inhibition on cross criticism between the two major media in the community which in itself would leave the community without any independent voice to criticize the impact that those media have on the community and the effect on its affairs.

We think that this is an egregious consideration that the Commission did properly recognize.

We disagree on the Court of Appeals that there was no rational basis for singling out those particular examples.

We do not believe, however, that the grandfathering that the Commission has adopted with respect to the other existing cross-ownerships was rationally justified by the considerations that the Commission itself chose to rely on.

On the Commission’s own terms we do not think the lines that it has drawn, the basic differentiation is introduced between the existing cross-ownerships and the future license questions, including transfers has been rationally justified.

Before I turn to the reasons why the Commission’s justification do not stand up, it is important I think to recognize that very important interests are at stake here in what the Commission has decided because not only the public interest that this Court has recognized in the Associated Press case and the other cases dealing with the First Amendment aspects of regulation in the area of news media, the public interest in the widest possible dissemination of information from diverse and antagonistic sources as it was put there.

But there were a number of examples before the Commission of disadvantages flowing from cross-ownership or safeguards from having an independent voice to which the Commission was surely entitled to give weight without going into great detail about them.

Examples were cited to the Commission, the joint operating agreement being —

William H. Rehnquist:

Mr. Wallace, may I interrupt you for a moment.

You are now arguing against the Commission’s grandfathering provision?

Lawrence G. Wallace:

Yes.

William H. Rehnquist:

And you are saying that there were examples before to which it was entitled to give weight?

Lawrence G. Wallace:

That is correct.

William H. Rehnquist:

And that does not make sense to me.

It seems to me that you must make a stronger case than that?

Lawrence G. Wallace:

Well, I am about to, but I am using this introduction to the deficiencies because I think it is important to recognize what was at stake before the Commission.

William H. Rehnquist:

But if it was entitled to give weight then it is not entitled to give weight.

Lawrence G. Wallace:

It obviously some weight to these or it would not have adopted the prospective rule in order the divestitures that it did.

One of the constraints upon the administrative agency is consistency in its treatment of various parties subject to its jurisdiction Mr. Justice and that is one of the problems which were presented here I want to highlight that in just a moment.

Warren E. Burger:

The consistency concept does not prevent a regulatory agency from having a change of mind or heart over a period of time, does it?

Lawrence G. Wallace:

Not at all, but it does have to base the way it applies that change on rational grounds that do not treat individuals arbitrarily based on factors that are unrelated rationally to the basis at which the agency has changed its position.

I want to just mention one or two examples that were before the Commission and to which it obviously gave some weight in adopting the prospective rule and of the divestiture requirement that it did.

One was an example of joint operating agreements that had been a subject of negotiation between the daily newspapers in a city and which were being opposed by labor unions and others in the community and where allegations were made that the television station owned by one of those newspapers presented no news concerning those agreements and their negotiations until they were consummated and that to have done so would have been against the economic interest of the newspaper that owns the television station.

Another example was editorial support in the local newspapers for a particular location for a museum to be built in the city which a location was close to where the newspapers were being published where there is considerable sentiment for the museum to be located elsewhere which is brought out only and independently operated television station in that community and was not allegedly covered in the particular papers involved there.

These are examples and the idea is not whether the particular examples were accurate but here were the kinds of dangers that the Commission had before it and obviously had in mind in its concern about cross-ownerships here.

The other factor to keep in mind is that the prospective rule that the Commission did adopt does have effect on existing combinations.

This is not a bright line between a prospective rule and a retrospective rule.

It has an effect on existing combinations by a process of gradual attrition of existing cross-ownerships at the time they are transferred for value and for example when the Washington Star in this city was sold within recent years, the transfer policy was applied to it and the co-owned television station could not be transferred to the same owner.

The result was a dissolution of that ownership where the competitive daily newspaper, The Washington Post was allowed to continue to have its locally owned co-located commonly owned television station.

Lawrence G. Wallace:

This introduces a disparity between newspapers in the same community which is a serious matter.

I do not say that it is not a constitutional disparity, that it is not something that Congress could have adopted, but it is a disparity in treatment in a constitutionally sensitive area which impels us to take a careful look at the reasons given by the Commission —

Potter Stewart:

That disparity would be wholly correctable within a maximum of three years if the Commission thought that, that disparity was a controlling reason for not granting the renewal of the application?

Lawrence G. Wallace:

It could be, but the Commission is under considerable inhibition at renewal time to engage in what it considers to be a forfeiture of the applicant’s license when the applicant is providing great service.

Potter Stewart:

Yes I know, but you are arguing now that the Commission was compelled not to have a Grandfather Clause?

Lawrence G. Wallace:

Well, I am arguing that the Commission, there are particularly strong reasons to see whether the Commission’s Grandfather Clause was rationally based, whether the grounds that it gave for adopting the Grandfather Clause stand up, on the Commission’s own premises.

That is all I am arguing, not that the Commission was compelled to have a Grandfather Clause.

Potter Stewart:

If it had this perspective rule it was compelled to have a Grandfather Clause, that was I thought what your argument was?

Lawrence G. Wallace:

Well we have said that —

Potter Stewart:

Am I mistaken?

Lawrence G. Wallace:

I believe you are Mr. Justice.

We have taken the position in our brief that the Court of Appeals went too far.

Potter Stewart:

Oh in requiring a rule.

Lawrence G. Wallace:

In requiring a rule and that the Commission if it can rationally justify a grandfathering, it is entitled to adopt a Grandfathering Provision.

We are saying a remand is needed here because the explanations which the Commission offered do not rationally justify the grandfathering that it adopted.

John Paul Stevens:

Mr. Wallace, what about the local ownership point which is the first one they make?

Why is that irrational?

Is it that it is so improbable that will have an impact on local ownership or in the alternative are you arguing that it is irrational to have local ownership be a factor to consider, which are you arguing?

Lawrence G. Wallace:

Well, we are arguing several points in response to that.

One is that the Commission has not repudiated its longstanding policy of not giving very heavy weight to local ownership as such.

John Paul Stevens:

Because it never said that it was totally zero factor?

Lawrence G. Wallace:

It has never said that it was totally zero.

Number two is that one quarter of the co-ownerships that it is grandfathering are not locally owned.

It does not really support the grandfathering of those particular ones.

A third point is that they were —

John Paul Stevens:

It was considered rational as to the three quarters?

Lawrence G. Wallace:

A third point is that there was nothing before the Commission to — it just shows that they were not really relying on that.

A third point is —

John Paul Stevens:

Listen and please answer my question if you would.

They did said it as a reason, they said they were relying on it, we have to assume that they wrote that opinion in good faith and you say it does apply the three quarters of the existing licensees.

John Paul Stevens:

Is it irrational as applied to those three quarters?

Lawrence G. Wallace:

Yes, because there was nothing before the Commission to show that local ownership would be diminished.

John Paul Stevens:

But was it irrational consideration that concluded that it might be and that is all I held and you gave an example earlier in your argument of the Washington-Detroit swap where it took place.

So how can you say that it is irrational to assume that it might take place?

Lawrence G. Wallace:

The Commission has approved many transfers over the years which resulted in diminution of local ownership as I expect they will approve the Washington-Detroit transfer and there was no evidence before the Commission that local ownership that they were not eligible local owners to come forward to be transferees of these licenses if the Commission were to require that they be transferred to locally owned interest, if the Commission wanted to give particular weight to that factor.

The Commission certainly did not give any weight to a requirement that local owners be found in the instances in which it was requiring divestiture.

William H. Rehnquist:

You do not need any sort of evidence in a rule making procedure, do you?

Lawrence G. Wallace:

No, but you need a rational ground for belief that, what you are worried about will be diminished by the particular course of action.

William H. Rehnquist:

But is not the Commission presume to have some confidence and expertise which can supply that rational ground just patently fallacious?

Lawrence G. Wallace:

It does have some expertise in this area, but there is nothing on the face of either Commission practice, what the Commission purported to rely on or what was before it to indicate that local ownership would be preserved by the Grandfathering or was of sufficient concern that the Commission that they were taking any step to assure transfers to local owners where they were requiring divestiture.

In other words, as we said in our brief, that particular element was a make way.

I think Mr. Firestone will deal with the other grounds relied upon by the Commission and why we do not think that they rationally justify the order that it adopted.

And I do believe that Court should keep in mind that in 1943 at the time the Commission adopted the rule against co-located AM stations it did not Grandfather, it did not introduce the disparities that it is introducing here in the example that I gave between two different newspapers in the same community.

Warren E. Burger:

Mr. Firestone somewhere in the course of your discussion, if you find it convenient and if you think it is relevant, would you relate what the Commission has done here to its situation that has been mentioned requiring a divestiture by the star of its broadcast relations and permitting even though it is true that any other licensee is up for renewal, but one was mandatory and one is a still open?

Charles M. Firestone:

Yes Mr. Chief Justice.

Mr. Chief Justice and may it please the Court.

I am Charles Firestone from the National Citizens Communication Broadcasting, which of course does seek affirmance of the court’s decision.

I have three points I want to make and during the course of that time, I do hope to address that point.

First, I would like to follow through on the Deputy Solicitor General’s arguments about why it was arbitrary and capricious in the to answer Mr. Justice Rehnquist’s question about the need for record.

The point is here I think that the Congress has ordered the agencies under the Administrator Procedure Act not to be arbitrary and capricious and that is really the basis of this court reversal that simply that the Commission was arbitrary and capricious in the way that they treated the various issues before them.

William H. Rehnquist:

That is quite different than saying it is not supported by substantial record concerns, substantial evidence.

A renewal survive the arbitrary and capricious test without it and all that the evidence includes for the Commission, is it not?

Charles M. Firestone:

Well, we believe that if there is absolutely no record support and no basis for coming to suppositions that it could rise to the level of arbitrary.

Thurgood Marshall:

Is it not difficult to find arbitrary and capricious over five year period of time?

Charles M. Firestone:

Your Honor, the place where it was arbitrary and capricious was the Commission’s failure to order divestiture and the failure to apply its prospective rule.

They applied, they set a standard here —

Thurgood Marshall:

And that was five years, they worked on?

Charles M. Firestone:

There were the five-year standard.

Thurgood Marshall:

Should I going to say that it is arbitrary and capricious?

Charles M. Firestone:

That the five-year standard —

Thurgood Marshall:

That would be arbitrary, but it shows, it is hard to see it is capricious.[Laughter]

Charles M. Firestone:

The five-year standard is now what we say is arbitrary and capricious.

What happened here is that the Commission used totally unsupported conjectures.

They applied standards which are inconsistent with past Commission practices and which are inconsistent with the Communications Act.

A second point, I hope to make in my argument is that the issue of discretion that the court remanded the case to the Commission contemplating that the Commission would have discretion when the case was remanded.

Of course, the agency has great discretion in this area and in fact the court restored discretion to the Commission in the important area of renewals.

The Commission took away its own discretion by its ad hoc standard in considering structural allegations of concentration of control.

Thus the Commission said, concentration controls of primary licensing factor and —

Potter Stewart:

The court did seem at least in its words to require that the Commission issued a rule in this area?

Charles M. Firestone:

Well, to the extent of that orders of rule, I think we would concede that the Commission does have authority.

Warren E. Burger:

To have no rule at all?

Charles M. Firestone:

To have no rule at all.

Warren E. Burger:

But is there a difference when they go part way down the road and not all the way?

Charles M. Firestone:

Yes you Honor, there is a difference there.

Warren E. Burger:

That the Court of the Appeals was pointing to?

Charles M. Firestone:

They pointed it to it, but I suppose that if the Commission acted rationally and the Court of Appeals pointed out many areas, this decision was riddled over there at the agency level.

The Court of Appeals pointed out many of the areas and I would not presume to be able to figure how the Commission is going to treat it.

They do have wide discretion, but it seems to me conceivable, that as long as there are not arbitrary on remand, they may adapt no rule.

Now that might mean no perspective rules, well I am not sure.

But if they do adapt the prospective rule, as they did here, and in their discretion found that nothing can be more important than insuring that there is a free flow of information, the Public has the right to know it, it derives from, but not just the First Amendment, it also derives from Section 303 (g) of the Communications Act which is on page A 29 of the joint appendix where it says, Congress mandated the Commission to promote the effective, the larger, and more effective use of radio in the NBC.

The Court in NBC said that this included a concern about the monopolization of media, but the Commission did come out with a standard.

They said that, it is unrealistic to expect a true diversity from newspaper broadcast station combinations, and therefore, in looking only to the broadcasting stations, and they not trying to regulate newspapers, they treat newspapers as they treat television stations to the extent you cannot own two television stations in the same market and they look to the equality more or less in terms of where people get most their news and information.

But when it came time to apply this to renewal, even though there is a three-year limit on renewals set by Congress and even though the Communications Act mandates larger and more effective use of radio, the Commission moved to immunize existing licensees from structural challenge on from the basis of the concentration of the control.

And on these three points, the Commission used to override the strong factor of the diversity, the Commission itself has said that diversity is the primary licensing factor and yet they look to this three overriding factors to this diversity criterion.

And the first, Mr. Justice Stevens, with regard to the local ownership, the first thing that Commission did was ban local ownership in the prospective rule.

If a local newspaper wants to acquire a local television station, they cannot do it, the factor diversity overrode.

Secondly as —

John Paul Stevens:

I did not bar local ownership.

I disbarred local ownership by a district (Inaudible)?

Charles M. Firestone:

Right, but certainly here, what it showed is that they preferred the criterion of the diversity over local ownership for the perspective rule, but turned it around and used this criterion to override diversity for existing licensees when 25% of them were not even local owners.

Charles M. Firestone:

Secondly, the Commission only looks to local ownership, traditionally and on the 1965 Policy Statement on renewals.

They only look at to the extent that there is integration of ownership and the management.

And here the broadcaster’s claim that the newspaper owners were not integrated in the management of the stations and Commission relied on that.

They said, where they not separately run they would require far many more —

William H. Rehnquist:

But does not the Commission’s reliance here supersedes whatever they said in 1965?

Charles M. Firestone:

Except that they have not — they have not rushed.

Perhaps, they could supersede it, but they did not do it here.

They did not really explain what they are doing here.

William H. Rehnquist:

Well, if every agency when it changes it might have to get out all of its other inconsistent statements that were made over last 40 years, we would never adjourn for the summer?[Laughter]

Charles M. Firestone:

That is true, but there are internal inconsistencies here, and also they did not really treat this issue of integration.

What they are talking about, they are saying local owners, they do not really go into this, but when you look other Commission Law over the years, they did not intend to overrule this issue of integration, they just did not deal with it.

And its just goes to the arbitrariness of the Commission’s decision here.

John Paul Stevens:

Mr. Firestone, I know the newspapers argued that they were not involved in the management of the station as much, did the Commission so find?

Charles M. Firestone:

The Commission stated that where it is not that case, where they are not separate ownership, they would require far many more divestitures.

They did not actually make the finding that, and they did not look into it any more.

They basically relied on these representations.

John Paul Stevens:

Are you saying that it would be irrational to attach any weight at all with the acquirement of local ownership, unless the local owner was actively involved in management?

Charles M. Firestone:

Under existing Commission Law, unless the Commission changes it.

John Paul Stevens:

Let us follow Mr. Justice Rehnquist’s suggestion.

Maybe all of the past the Commission law has been irrational, the question is whether this particular ruling was rational, is it not?

And would it be irrational for the Commission to attach some weight to factor local ownership even though the local owner were not actively involved in management?

Is that not the question?

Charles M. Firestone:

I do not think it is the question, but if it were —

John Paul Stevens:

Well, we must mean different things by irrationality, that is there are different kinds of irrationality?

Charles M. Firestone:

No, I think that the question here is, has the Commission been internally inconsistent?

Have they been inconsistent with prior policies without explaining their part?

John Paul Stevens:

In other words, whenever you find inconsistency, do you necessarily find irrationality, is that your view?

Charles M. Firestone:

I think that it raises the question of irrationality.[Laughter]

I think inconsistency, raises the question of irrationality, but here, if they had some reason for the inconsistency it would be one thing, but they did not explain any reasons for that and they just mentioned it.

In fact, in this case they actually purported to be following past policy.

Charles M. Firestone:

They alluded to the 1965 Policy Statement and I do not think it was their intention to go to retreat from that integration of ownership and the management factor.

Second, the issue of the local economic dislocations was another example.

First of all whether it was —

John Paul Stevens:

I just ask one other question, Mr. Firestone.

On remand I take it, it would not be open to Commission to rewrite in its opinion entirely and say well we would review the entire matter from a new angle, we overrule a lot of prior decisions, we now conclude upon fresh review that the Grandfather Clause is proper and the prospective rule is proper both.

Could they write a better opinion and still sustain the rule under the Court of Appeals mandate?

Charles M. Firestone:

Under the Court of the Appeals mandate, the quick answer to your questions is, I do think the Commission could rewrite the opinion.

John Paul Stevens:

And reach the same result?

Charles M. Firestone:

And reach the same result.

It is very hard to determine, I cannot really determine that.

John Paul Stevens:

So, if you assume they could have written a better opinion and reached the same result you must be assuming that it was not totally irrational?

Charles M. Firestone:

Right, but well, I think generally —

John Paul Stevens:

Is it the remand, is not generally the remand, it is not the remand to say go ahead and restate your reasons, your reasons do not adequately support the conclusion.

If I understand that, the remand is to carry out the direction of the Court of Appeals as to what the rule should be?

Charles M. Firestone:

Well, we do not read that decision.

We read the decision for instance in footnote 53, to contemplate that there might be a totally different rule, a totally different even prospective rule in terms of a 30% criterion as was suggested by some people including some parties here.

But getting on to the local economic dislocations criterion, the Commissions says, we are afraid, in fact they do not make it clear again, we are not sure what they said, except that the counsels explain that they say that they are concerned about reinvestment of having enough money to increase interest rates, or concerned that interest rates will increase, if there is a widespread divestiture.

And they were concerned if there would be enough money to invest in the program, and yet the Commission specifically has refused to look at this question in licensing cases, and in the Alianza case which we cite is an example where the Court of the Appeals has affirmed the Commission’s refusal to look into this criterion in the public interest.

Now, they are using that criterion to override their strong interest and diversity of communication sources.

Similarly with continuity of ownership and there of course the licensee just minimally served the public interest over the years.

Mr. Armstrong says, the longevity of their service is the factor that really matters, but if their service has not been good, it may be that the new licensee will do a much better job.

In the WDHDH case, the one time, when a newspaper television broadcaster cross-owner was replaced with a new applicant, that new applicant, or that new licensee has performed excellently, superior service throughout, and it is recognized throughout the country, to that effect.

Now, of course broadcasters do they take their license subject to renewal at the time and subject to the rules in effect at the time of renewal.

No license can last no longer than three years, they ran on their record, and you can have the record go on for say that because they did a great job 20 years ago, but have not done a good job the last three years, that does not mean anything, and has not, in the past Commission’s Decisions.

But the key fact here is the Commission did not really come to a systematic evaluation of the record, they did not really look at their own past precedent.

They did not look at and there are internal inconsistencies in the order.

Now, with the respect to the issue of discretion, in answer to Mr. Chief Justice’s question with respect to the Washington Star, of course the Commission’s Rule applies to transfers.

The Washington Star was in bad shape according to their allegations and they needed an influx of money and they — not into a transfer of control.

The licensee basically would have continued with Washington Star and WMAL, the radio and television stations, yet the Commission’s rule prospectively said that this is a sale and the public interest is not served by the acquisition of a TV and a newspaper or broadcast TV.

Warren E. Burger:

But if basic principle is true, why does it not apply to the existing situation and many others?

Charles M. Firestone:

That is exactly our contention that it should and in fact, what they have done is apply the public interest standard to transfers which they refuse to apply to renewals, and yet it is the same a public interest standard.

Now, maybe, there are factors that can override this diversity criterion, with respect to renewal applicants.

The Commission did not really and rationally dealt with that, and they threw out some reasons, but really the Commission had a goal here, and they stated the goal as diversifying the media of promoting diversification, and yet what it has done is has turned around and protected existing licensees against challenge and against the applications of this public interest standard at renewal time.

And I like to give an example, and what I consider a better example in terms of this issue and that is in Lancaster, Pennsylvania, there was in 1975, a newspaper monopoly owned by one family, the only newspaper in town, the only VHF station in town, two or five radio stations, a cable television system of which it was co-owned, they own 60% or 40% owner, owned two of the remaining three radio stations in town.

It was grandfathered because there was an incoming signal from a station assigned to Lebanon and Lancaster, it is hyphenated market and this was a UHF signal.

Now, in a consideration on that renewal of that Lancaster Station, the Commission would not allow a showing that the incoming signal was not a significant signal that 15,000 people could not really obtain that signal.

It will not allow a showing as to inapplicability of any of these criteria, such as local ownership, such as continuity or local economic dislocations.

They would not even allow a showing as to the Sherman Act violation, the allegation of Sherman Act violation which the Commission said was standard.

They would not allow a showing because they said they are not equipped to administer the antitrust laws.

There was a catch 22 there and finally, under the reconsideration order, under the Commissions Standards, if that UHF Signal went dark tomorrow, of course the situations has since changed, but, if that signal went dark, the Commission said in reconsideration, that it would not require to divestiture even in that event, even though it met this standard of egregiousness that they have required divestiture for the 16 because they said they are concerned about uncertainty, they did not want the licensees to feel uncertain.

Your Honor, if I can just sum up.

I think that the basis here is the First Amendment interest and the diversity of information sources, as Judge Learned Hand said, to some it may be folly, but we have stake upon it our all.

Thank You.

Warren E. Burger:

Mr. Griswold, you had some observations right down, so that your argument about the unconstitutionality of saying a newspaper cannot have the same rights as anyone else, how would you apply that preposition to what I have just been discussing with Mr. Firestone on the Star?

The Federal Communications Commission, it appears said to the Star, the new owners of the Star you cannot have this televisions station.

Under your theory, as you outlined at the outset, that would be unconstitutional, would it not?

Erwin N. Griswold:

If done by a blanket rule which prevents the consideration of all of the facts circumstances, with respect to that particular case.

Warren E. Burger:

It was a blanket rules?

Erwin N. Griswold:

In this case it is a blanket rule.

Warren E. Burger:

In the Star Case?

Erwin N. Griswold:

I am sorry, I am afraid I do not understand the case.

Warren E. Burger:

Well, when the Star, when a new owner bought the Star, he had the diversity of television license element there?

Erwin N. Griswold:

When, when I am sorry (Voice Overlap)

Warren E. Burger:

When the new owner bought the Star —

Erwin N. Griswold:

Oh! The Washington Star?

Warren E. Burger:

WMAL, to get —

Erwin N. Griswold:

I think that of course, as far as I know is the only case, or at least the only prominent case which actually exists under this rule and I think it shows among the other things that this rule does not promote diversity.

What has happened by taking the ownership by a newspaper into account in a particular case with respect to the Boston Herald has been to destroy the Boston Herald and what may happen with respect to the rule is applied to the Washing Star may be to destroy the Washing Star and my contention is that, the Commission not only has no authority under its existing statute to make a rule applicable only to newspapers, but that it may well be unconstitutional in doing so, in particular, in dealing with the final case to which Mr. Firestone referred, I would like to suggest that there is nothing about that in the record of this case and if the Commission was in error in that case it should come up in that case on that record.

Byron R. White:

Are you suggesting that, constitutionally, the prospective rule might survive, but the divestiture rule might not?

Erwin N. Griswold:

No, Mr. Justice, I think that constitutionally the prospective rule should not —

Byron R. White:

Oh I understand, I understand but you concede that the one surviving and not the other?

Erwin N. Griswold:

Oh! I can concede it, yes but my position is, that the prospective rule is not constitutional.

There is no previous case, which applies any statute or any rule of the Commission to newspapers, to all newspapers and only the newspapers.

A reference has been made to the NBC Case and that involves question of affiliation of a station with a network, completely broadcast.

The Star Case involved multiple ownership of broadcast stations, only broadcast.

Byron R. White:

Well, why should the owner of broadcast station be forbidden from acquiring another just because he is a broadcaster?

Erwin N. Griswold:

Mr. Justice, I think that was probably settled as long ago as the Federal Radio Commission Case in 1930.

Byron R. White:

Maybe?[Laughter]

It maybe settled but was it right?

Was it settled right?

Erwin N. Griswold:

The Pottsville Case is 1940, yes, I think so.

Byron R. White:

And why, can I ask you why?

Erwin N. Griswold:

And the Red Lion Case in which I appeared seven or eight years ago, for better or for worse, the Court has taken the role, I am inclined to think for the better though it is an awful course question, but there is something about broadcasting involving the limitation of the spectrum, which makes it appropriate for the Government to introduce a regulation.

There is no such rule with respect to the press, and that is the position we take here.

Retrospect to my inquiry long ago about the scarcity of newspaper –?

Erwin N. Griswold:

Yes, there is a greater scarcity of newspapers now, and there may be more.

The next step here, will be barring all newspapers everywhere, they talk about swapping, but if you can do this, you can make a rule which says, that no newspaper can own a television station.

We think that this was in effect covered by the Gross Jean Case —

John Paul Stevens:

Mr. Griswold, supposing we had a situation in which Congress repealed the Sherman Act, then passed the new statute and said that it should be unlawful for newspapers to enter into agreements and restrain the trade, would that be constitutional?

Erwin N. Griswold:

Yes, Mr. Justice.

John Paul Stevens:

That would be all directed in newspapers and no one else?

Erwin N. Griswold:

I am quite sure it would, and that it is seems to me is exactly what the Court decided on the Gross Jean Case where it held that the tax applicable only to newspapers was invalid and as this Court has said with respect to that in the Oklahoma Press Case, the singling out of the press for different treatment from that accorded other businesses in general is invalid.

John Paul Stevens:

What do you mean?

You mean the statute would be unconstitutional?

Erwin N. Griswold:

The statute would be unconstitutional, that was I thought I said.

John Paul Stevens:

No, you said it would be, in other words, you say if there were a statute to repeal the Sherman Act, we pass a new statute and say that monopoly and restraints to trade in the newspaper business are here by forbidden, you say that is unconstitutional?

Erwin N. Griswold:

Mr. Justice, I think that any legislation by Congress which is applicable only to newspapers would almost inevitably be a violation of the First Amendment, unless, maybe it gives them something.

Warren E. Burger:

Yes, I was just going to say that.[Laughter]

I was just going to call your attention to the Newspaper Preservation Act.

You are a good lawyer, Griswold.

Warren E. Burger:

Which permitted, which permitted[Laughter]

Erwin N. Griswold:

Well, I have always been troubled by the Newspaper Preservation Act and that of course is a step in the direction of easing the antitrust laws giving them something and as long as the antitrust laws are applicable to newspapers and the Labor Relation Laws, have also been held to be applicable in newspapers, I would suppose that Congress can minimize the situations in which those statutes apply.

Warren E. Burger:

Very well.

Thank you Gentlemen.

The case is submitted.